Understanding the pros and cons of tax filing extensions

On behalf of Mockensturm, Ltd. posted in Tax Planning on Tuesday, April 11, 2017.

It may seem hard to believe, but the deadline for Tax Day 2017 is now just over a week away, falling, oddly enough, on Tuesday, April 18 owing to an especially peculiar calendar year that sees April 15 fall on a Saturday and the following Monday fall on a designated holiday in Washington, D.C.

While it's tempting to think the number of people who file their returns on time will be greater than in years past owing to these extra few days, experts indicate that this isn't likely to be the case. Indeed, many are predicting that just like every other year, millions of people will not file their returns on time due to everything from procrastination to the inability to secure critical forms before the deadline.

Even though the failure to file a return by the April deadline might seem like an incredibly alarming prospect, the reality is that it isn't the end of the world, as virtually anyone can submit IRS Form 4868. In fact, agency figures show that 13 million taxpayers did exactly this last year.

This form, if submitted before the expiration of the tax deadline, will automatically grant a taxpayer a six-month extension to file. For example, if you file for an extension by April 18, you will then have until October 16 to file your return.

While the notion of a six-month reprieve can provide some relief, experts indicate that taxpayers need to be aware that they are still required to pay any taxes owed by the deadline.

In other words, the extension applies only to time to file, not to remit payment to the IRS. Indeed, the failure to pay taxes by the deadline will subject the taxpayer to costly interest and penalties.

This naturally raises the question as to what taxpayers who are fairly certain they will need to pay taxes should do.

According to experts, they should strongly consider estimating the amount of taxes owed -- always rounding up -- and sending a check along with the request for an extension.

It will be interesting to see what role, if any, this year's built-in extension plays in the number of taxpayers looking for more time to complete their returns.

If you have questions about a tax related issue or require eleventh hour assistance with tax preparation, consider consulting with a skilled legal professional as soon as possible.

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